Higher Net Investment Income: Pay Less in Taxes

Having a high net investment income is what every investor shoots for. The ability to bring in enough money to live on from your investments is a dream for many investors. However, the dream also has huge tax advantages as well.

Regular income is taxed at a much higher rate than investment income. If you make enough money, your tax rate could be as much in the mid 30% range. However, depending on the investment, the tax rate could only be 20%. Investments essentially are a lot less likely to incur high taxes than your regular earned income.

Tax deferred investment plans give you even more of an advantage. There are many different kinds of investment plans that will allow you to grow your investments without paying taxes on them. Plans like IRA's and 401k's are great for this type of tax-deferred savings. If you wait long enough to withdraw the money, you will not be hit with any early distribution penalties either.

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